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YOUR OFFER EXPIRES AT MIDNIGHT:

It’s the end of an era in the stock market as we know it...

Here’s what to do about it:

Motley Fool analysts now believe a “Sea Change” in the stock market is upon us (you’ve likely already noticed the beginning of it over the past year) the likes of which we haven’t seen in a decade and a half… perhaps even going back as far as 40 years!

This “Sea Change” stands to disrupt everything we thought we knew about “business as usual” in the market going back to the Global Financial Crisis. Simply put — it’s highly likely that the previously hyper-effective investing tactics we’ve used throughout the past 15 or so years will no longer succeed over the foreseeable future.

So read on for both a full explanation of this radical “Sea Change,” as well as to find out precisely how The Motley Fool has already begun pivoting to a comprehensive new investing strategy to take advantage.

Fair Warning:

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But First, Don't Forget Your Free Copy of:

1 Stock We Love That's Just Too Big (To Be a Real Firecracker)

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Dear fellow investor,

Is the stock market as we know it coming to an end?

A few short years ago it would have felt like an insane question to ask.

But after the past year…

Well, it certainly feels like it.

One of the most respected investors on Earth agrees, saying:

“In my 53 years in the investment world, I’ve seen a number of economic cycles, pendulum swings, manias and panics, bubbles and crashes, but I remember only two real sea changes. I think we may be in the midst of a third one today.”

—Howard Marks, Billionaire Co-Chairman of Oaktree Capital Management

We’ve mentioned Howard Marks and his “Sea Change” prediction a few times over the past few days here at The Motley Fool, but in case you missed it, not only does his company manage US$163 billion worth of client assets…

But Warren Buffett has noted, “When I see memos from Howard Marks in my mail, they're the first thing I open and read. I always learn something.”

Hard to imagine a better endorsement for an investor than the Oracle of Omaha himself.

Point being, when Howard Marks says a “Sea Change” is upon us — only the third-such occurrence he’s seen in 53 years as an investor, mind you — everyone would be wise to stand up and take notice.

You’ve probably felt the changes in the market yourself, but let’s double-click on precisely what Marks is saying.

“If you grant that the environment is and may continue to be very different from what it was over the last 13 years — and most of the last 40 years — it should follow that the investment strategies that worked best over those periods may not be the ones that outperform in the years ahead.”

—Howard Marks

A persistent environment for the past 40 years that’s become even more exacerbated over the past 13…

Any idea what Marks could be referring to?

If you guessed “low interest rates,” you’re spot on.

These days, everybody and their mother is chirping about the U.S. Fed frantically raising interest rates to levels not seen for four decades in order to combat inflation that’s also not been seen for four decades.

When an investing story moves from the front page of CNBC to the front pages of pretty much every news organization in North America, you know it’s a big deal.

And with the kind of bloodbath in the U.S. market we’ve seen over the past year or so, it’s hard to blame them.

While it’s true that the U.S. S&P 500 is down “just” 11% since fall 2021…

The more tech- and growth-oriented Nasdaq is down a whopping 28%.

More than a quarter of its value has been sliced off in a little over a year!

So what’s the problem?

Without getting too far into the weeds, the low interest rate environment we’ve become accustomed to over the past four decades… and particularly since the Global Financial Crisis has made access to capital incredibly simple.

Has that allowed a great many companies to flourish?

Sure has.

That said, the news hasn’t all been positive…

With money so cheap and profitability so comparatively simple to achieve, that same low-interest rate model has also allowed many low-quality companies to go public and easily gain credibility.

But what happens now that U.S. interest rates have skyrocketed to levels we haven’t seen in 40 years…?

Access to easy capital dries up.

Profits become harder and harder to come by for companies without an established, rock-solid business model.

Morgan Stanley strategist Michael Wilson warns that profit margins at tech companies are going to take a hit this year.

(I should say “another” hit.)

On top of that, everyday investors like you and me no longer need to embrace unproven, riskier growth stocks in order to generate solid returns.

As of late January, you can throw your cash into a 12-month U.S. treasury and lock in a guaranteed 4.61% annual yield on that investment.

With assured returns like that, it’s easy to understand why investors would be increasingly loath to take on the kind of risk and volatility that comes with the technology sector.

Which brings me back to the 28% haircut the tech-heavy Nasdaq has taken over the past year.

Of course, you don’t have to be an age-old member of The Motley Fool to know we heavily focus our investment philosophy on the technology sector, small-caps, and momentum stocks in general.

So am I calling for the death of tech stocks?

Of course not.

There are still hundreds of great public companies out there in the technology sector, even if most of them are well off their 2021 highs.

What I am saying is that there’s plenty of evidence right now to suggest that the economic factors that have helped propel tech over the past decade and a half or so have altered.

Radically altered.

Those tailwinds are dead.

As longtime Motley Fool investor Bill Mann put it in our presentation of “Sea Change: End of a Stock Market Era”:

“In the last 1,000 years, the last 15 years were unprecedented. I don't know that there's a reasonable case that that's coming back anytime soon.”

—Motley Fool analyst Bill Mann

Of course, there’s a reason that over our three decades as a successful business the Fool has weathered everything from the dot-com bubble (despite being ourselves a dot-com company)…

…to the Global Financial Crisis…

…to the pandemic slicing 30% off the markets in roughly a month (and on both sides of the border)…

…and now to this latest inflation crisis, which is basically dot-com 2.0.

We don’t stick our heads in the sand when things go wrong, and we certainly don’t slam them against the wall repeatedly if something isn’t working.

We analyze the situation, then we adapt.

That’s precisely what we’re doing right now.

I’m talking about a laser-like refocusing on the underlying fundamentals that have allowed us to triumph over the various problems the Fool’s seen in the market over the past 30 years.

We all know those fundamentals have always been the bedrock of any successful investing, but they’re about to be returned to the front and center.

Right where they belong.

So how long are we expecting this “Sea Change” to last?

A year or two?

While I don’t want to go overboard attempting to predict the economic environment years in advance, there’s a reason I’m writing to you with a good deal of urgency today.

Here’s what Howard Marks has to say:

“Inflation and U.S. interest rates are highly likely to remain the dominant considerations influencing the investment environment for the next several years.”

—Howard Marks

It’s entirely possible this “Sea Change” could last through the rest of the 2020s… if not longer.

We’re certainly not expecting a breather any time soon…

So what exactly are we supposed to do?

As I said earlier, it’s time to get back to the fundamentals.

Numbers matter again.

Let’s start with this recent quote from Bloomberg:

“After years of lagging behind their growth peers, cheaper so-called value stocks outperformed in 2022 as major central banks hiked rates to tamp down surging inflation.”

—Bloomberg

Analysts at Goldman Sachs echo that sentiment:

“As big cap technology sees further margin pressure, commodity prices rise and real interest rates remain higher, we think this trend [value outperforming growth] has further to go.”

—Bloomberg

And Yahoo Finance concludes simply:

Value Investing is the Key Now”

—Yahoo Finance

We're getting back to an environment where value-based investing is going to become more in favor.

And it’s going to be worth much, much more to know what a company is doing NOW and much less what might happen in the future.

If you’ve taken a glance at your portfolio over the past year or so, you probably know what I mean.

Stocks with marginal or no profits and without an established business model have been left in tatters.

SaaS. Cloud computing. Biotech.

It’s time to change the paradigm.

It’s time to return to properly considering the actual value of companies.

Not what they “might be.” What they are.

As legendary investor Joel Greenblatt defines value investing: “I want to identify what an asset is worth and then buy it for much less than that amount.”

In a total “No duh,” statement, it’s REALLY hard to lose money if you buy something for less than it's worth.

Yes, the market can fluctuate…

It certainly doesn't owe you anything in the short term.

But if you buy something for less than it's worth, it tends to work out pretty well over the long term.

That’s the return to fundamentals that I’ve been referring to.

Which leads me to a question you may be asking, particularly with how the investing landscape has looked over the past 15 years or so…

“Is value investing too boring?”

When I think of some of the most exciting, dynamic, innovative companies in the world, there have been times in recent history when you could have purchased them at a discount to the amount of cash they could generate.

Apple, Amazon, Microsoft, Lululemon, Netflix, Starbucks.

Those are decidedly NOT boring companies.

Nobody would ever say that about any of them.

Yet there were times in recent history when you could have definitively bought them at a discount to a conservative appraisal of their value.

That’s value investing.

Point being, we aren’t just talking about buying utilities providers or steel manufacturers here.

But if you’re still unconvinced, how’s this for exciting?

According to acclaimed investment researchers Fama + French, over rolling 15-year time periods from 1927 through 2019, U.S. value stocks have outperformed growth stocks 93% of the time.

That’s not even the truly mind-blowing stat.

Another Fama + French study shows…

U.S. value stocks have beaten growth stocks by an average of a staggering 4.1 percentage points PER YEAR going back to 1927!

I want to emphasize that’s 4.1 percentage points, not merely 4.1%.

When you consider the market has traditionally returns around 10% per year over the long term, a 4.1 percentage-point outperformance by value stocks vs. growth stocks is eye-popping.

We actually ran some simulations to show just how dramatically a 4.1 percentage point outperformance can affect your portfolio over time.

For the purposes of this simulation, we chose 10% as the estimated return from value stocks and 5.9% — that’s simply 10 minus 4.1 — as the estimated return for growth stocks.

(Of course, the estimated percentage return for each is arbitrary and the important point is the absolute difference between the two.)

Simulation 1 – Value vs. Growth Over 10 Years

Okay, so let’s say you put $25,000 into growth stocks earning an estimated 5.9% per year. After 10 years, you’re at $44,350.

chart

Chart refers to U.S. market.

Now, if you’d put that same $25,000 into value stocks earning an estimated 10% per year, you’d be looking at $64,844.

chart

Chart refers to U.S. market.

Okay, that’s a difference of about $20,000 — not a bad start for just a decade in, right?

chart

Chart refers to U.S. market.

Simulation 2 – Value vs. Growth Over 20 Years

But what if we start to expand the timeline out a bit? Let’s run the same numbers over a 20-year time period.

This time, the same $25,000 in growth stocks reaches $78,679, or roughly 3X your initial investment.

chart

Chart refers to U.S. market.

But the same $25,000 in value stocks now soars into the six figures — $168,187 to be precise.

chart

Chart refers to U.S. market.

6X your original investment, not to mention almost exactly double what you’d have from growth stocks.

chart

Chart refers to U.S. market.

Simulation 3 – Value vs. Growth Over 30 Years

Okay, finally let’s really stretch it out and look at a 30-year compounding period. It may be hard to envision 2053 right now, but hey, that’s the goal of long-term investing, right? It compiles for decades.

After 30 years, your initial $25,000 put into growth stocks would shoot up to $139,579 — roughly 5.5X your money.

chart

Chart refers to U.S. market.

But here’s where value stocks really start to stretch it out. After 30 years at 10%, $25,000 — and remember, ZERO further investment after that — would skyrocket all the way up to $436,235.

So not only are we fast homing in on half a million dollars overall… but we’re at more than 17X our initial investment.

chart

Chart refers to U.S. market.

And we end up with a staggering $296,656 more than we’d otherwise have from investing in growth stocks.

chart

Chart refers to U.S. market.

The proof is in the pudding.

Over the long haul, U.S. value stocks have utterly destroyed growth stocks.

And it makes sense when you think about it, right?

By definition, value stocks are just stocks that are cheaper on a per-share basis.

Growth stocks are the opposite — stocks that are more expensive.

So they’re less proven, and, barring advantageous circumstances like the past 15 years in particular…

Yeah, they’re probably less likely to work out.

For many investors, it’s probably hard to remember a time in the market when growth stocks didn’t have that kind of radical advantage.

That time has returned.

That’s the “Sea Change” I’ve been telling you about.

Now how are we going to take advantage of it?

Introducing the newest service from The Motley Fool…

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It’s my great pleasure to introduce Value Hunters, the single most comprehensive value-based investing service in the history of The Motley Fool…

While the underlying methodologies may be complex, the investment approach itself is quite simple:

Value Hunters strives to identify high-quality U.S. businesses, estimate what they are worth, and then purchase shares at a discount to that value.

Just like Joel Greenblatt’s definition from earlier.

Because we target well-run, competitively advantaged companies, time is always on our side.

These great businesses tend to grow stronger every day, and by focusing on their underlying business performance instead of short-term stock price gyrations, we allow the magic of compounding to work on our behalf.

Easy to understand? Yes.

Exceedingly difficult to execute.

It requires patience, a strong stomach, and the ability to think differently than the crowd.

But the potential rewards make the extra effort worthwhile.

Buying high-quality companies at attractive prices not only makes sense, but it’s been the common thread among many of history’s most successful investors.

Here are the qualities Value Hunters is looking for in winning investments:

Sustainable competitive advantages: We cherish U.S. companies with enduring economic moats — a set of characteristics that will keep competitors at bay and enable the business to consistently earn high returns on invested capital. Such characteristics include strong brands, cost and data advantages, high customer switching costs, and solid network effects.

Sound financials: We look for companies with diversified revenue streams, strong balance sheets, and steady free cash flow. These businesses can comfortably reinvest to drive future growth and use excess cash to enhance shareholder value via dividends and share repurchases.

Talented and trustworthy leadership: We love to invest alongside execs that treat shareholders as partners. We look for sensible compensation practices, a material ownership stake, and a history of sound judgment and prudent capital allocation. We also appreciate clear and candid communication with shareholders.

A margin of safety: We always insist upon buying a stock with a sufficient margin of safety. This represents the difference between the market price of a stock and our estimate of its fair value — the wider, the better. Buying with a margin of safety helps protect our downside in case our investment thesis doesn’t play out as we expect… and it adds extra upside when we’re right.

Inside Value Hunters, we’ll be targeting four specific sub-categories of value.

Value Hunters Category No. 1 –

Compounders

Slow and steady wins the race.

“Compounders” are the types of high-quality companies that can consistently generate large returns on invested capital for decades on end.

Sleep soundly at night as these companies compound value on your behalf with some or all of the following characteristics:

Strong and sustainable competitive advantages

Experienced, savvy, and shareholder-friendly management

High and consistent returns on capital

A history of innovation and winning

Difficult to displace assets

A reasonable current valuation

Sounds easy enough, right?

Of course, because everyone recognizes the greatness of these bedrock companies, they are rarely available at attractive prices.

But during periods of economic uncertainty and market downturns — you know, kind of like right now! — we sometimes get the opportunity to buy these best-of-breed businesses at cheaper (if not downright bargain) prices.

What kinds of companies am I talking about?

Think long-time Motley Fool U.S. recommendations like Berkshire Hathaway, up more than 5X your money since first recommended by the Fool…

chart

Chart refers to U.S. market.

And of course, legendary Motley Fool U.S. recommendation Costco, which is actually the single longest active recommendation in company history after being picked all the way back in April 2002.

It’s up roughly 16.5X since then, turning every $25,000 invested into $411,500.

chart

Chart refers to U.S. market.

Value Hunters Category No. 2 –

Mispricings

When a wonderful business encounters short-term headwinds, sometimes the market overreacts and gives long-term-focused investors an incredible buying opportunity.

Rewind back to early 2016, when Apple shares lost almost a third of value after the company posted its first quarterly sales decline in a staggering 13 years.

Although Apple was still massively profitable and had more than US$200 billion in cash and investments on its balance sheet, concerns over a lengthening iPhone replacement cycle caused many investors to head for the hills.

But not Warren Buffett, who bought shares for the first time ever.

Lo and behold, the shares he purchased around that time would be up more than 500% today.

The Motley Fool has also had plenty of success with Apple over the years, with our original investment up 27.5X.

chart

Chart refers to U.S. market.

Perhaps the best example is historic Motley Fool winner Monster Beverage.

chart

Chart refers to U.S. market.

Shares of MNST fell 44% between June and November 2012 after the U.S. Food and Drug Administration said it was investigating five deaths associated with the company’s energy drinks.

Did the bad publicity weigh down Monster’s shares for a few months? It did.

But it didn’t stop consumers from buying Monster’s drinks, which drove a steady increase in sales and earnings.

Nowadays, Monster shares are up 600% from those 2012 lows.

Value Hunters Category No. 3 –

Deep Value

Perhaps the most exciting of all four categories is Deep Value.

Quite simply, these are opportunities that are absurdly cheap.

Now these businesses may be lower on the quality spectrum, but that risk is mitigated by their heavily discounted share price.

Value Hunters Category No. 4 –

Special Situations

This is where Value Hunters really starts to show its “value” in comparison to many of the other Motley Fool services you may be accustomed to.

These are investments that rely on a specific catalyst to create value, such as a turnaround, acquisition, spin-off, or asset sale.

Long-time Motley Fool U.S. winner Chipotle serves as a perfect example.

chart

Chart refers to U.S. market.

Chipotle shares fell 65% from Aug 2015 to Feb 2018 due to food safety concerns following a series of E. coli outbreaks, and it seemed the once-mighty brand was dead.

In fact, in a 2018 survey, a whopping 32% of consumers said that “nothing” would make them want to visit the chain more frequently.

But Chipotle brought in a new CEO from Taco Bell who fixed the food safety issues, added novelty to the menu, invested in marketing, and made a big push into digital.

Half a decade later, the stock is up roughly 500% since the new CEO took over.

Which brings me to a question that’s likely starting to bubble up in your head…

“What exactly will I get as a charter member of Value Hunters?”

The instant you join, you’ll get access to our initial five U.S. stock picks, already waiting for you on our private, members-only website as we speak.

Here’s just a quick tease of some of the stocks you’ll find:

The Booking.com of Latin America” — With services available in 20 different countries, the “Booking.com of Latin America” is the leading online travel agency in the region. Online travel agency services still have huge room for growth in the Latin American market, and this company’s stock price is even more attractive after having nearly 2/3 of its value shaved off at the outset of the pandemic.

Speaking of which, pandemic conditions have accelerated digital commerce and online banking adoption in Latin America, helping to further expand this company’s addressable market. Mobile hardware and high-performance wireless internet services are also seeing increasing adoption in the region, and it's likely that a growing share of travel commerce will be conducted through online channels.

Not to mention that the company’s middleman role in the travel industry — facilitating business for other players in the space and benefiting from their growth — allows the company to run a relatively asset-light business and opens the door for big earnings growth down the road.

The Litigation Leader — This London-based company is a leader in the budding litigation niche of the finance industry. Essentially, the company lends upfront cash to other companies for lawsuits, in exchange for a percentage of the potential settlement down the road.

Risky? Perhaps. But the rewards for “The Litigation Leader” can be exponential. For instance, the company currently has an outstanding case in which the team invested US$50 million at the outset… and would stand to make billions if the case is resolved favorably.

No wonder this company has generated 95% return on invested capital over its history… OR that more than 90% of the top 100 law firms in the world have done business with this brand!

Of course, that’s just the beginning of everything you’ll get as a charter member of Value Hunters, including:

Ongoing monthly recommendations

A monthly ranking of every stock in the service, so you always know which ones we prefer at any point in time

A monthly commentary with updates on significant events impacting our recommendations

More timely updates as needed if there is a material change to one of our investment theses or intrinsic value estimates

A recorded monthly member Q&A

And, yes, while our team’s preference is to own great businesses forever, this is still a value-oriented service.

That means we’ll occasionally sell stocks.

There are three primary reasons our Value Hunters team will sell a company:

Our investment thesis is busted

The stock is significantly overvalued

We find a superior investment alternative

Please note that we will not necessarily sell a company if its share price reaches or even exceeds our intrinsic value estimate (which will accompany all recommendations).

Our goal is to own these wonderful businesses for the long haul, even if they do become moderately overvalued every now and then.

We believe that letting our winners run is a key component of successful Foolish investing.

But that’s not even close to everything you’ll get when you become a charter member of Value Hunters today…

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Because when you join us as an “Early Bird” before MIDNIGHT TONIGHT, you’ll get a FREE upgrade to VIP status, including the following bonus reports:

VIP Exclusive

“The Executive List” report:

Five of our current top stocks from “Fool IQ,” our proprietary internal program that ranks the most respected stocks by our analysts across all of The Motley Fool. [A $500 value — yours FREE!]

VIP Exclusive

“3 Dividend Stocks to Combat Inflation” report:

As we’ve discussed at length today, inflation is here… and, despite the Fed’s best efforts, it’s likely here to stay for quite a while. This report reveals three stocks that we think are perfectly set up to fight off inflation, while delivering a healthy dividend in the process. [A $300 value — yours FREE!]

Okay, that’s a lot of value included in your charter membership to Value Hunters.

At this point, there’s just one final question to answer…

How much is all of this going to cost?

We’ve set the list price to join Value Hunters at $1,199, which I believe is a fair price for everything you’re getting today.

Remember, not only will you get full access to Value Hunters as a charter member…

You’ll also receive our two VIP reports, “The Executive List” and “3 Dividend Stocks to Combat Inflation” (a cumulative $800 value).

Meaning you’re getting a total value of $1,999 for a steep discount...

All in all, a great value if you ask me.

Because with our special “Early Bird” charter member offer, we’ll immediately take $200 OFF, plus throw in $800 worth of bonus gifts, just for VIP members like you!

Meaning you'll receive all of the above for just $999 today.

Here’s how it looks for the more visually inclined.

 Motley Fool Value Hunters $1,199
“The Executive List” $500
“3 Dividend Stocks to Combat Inflation” $300
Total Value $1,999
Total Value $1,999
Your Price $1,999
$999

And while we don’t offer cash refunds on Value Hunters, I do have some good news…

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Our Ironclad 30-Day Satisfaction Guarantee

VIP Exclusive

All members joining through this VIP member invitation are also covered by The Motley Fool’s exclusive satisfaction guarantee!

If for any reason you’re not completely satisfied with Value Hunters in the next 30 days...

Simply contact our helpful member support team by Day 30 of your membership and they’ll happily work with you to transfer your membership fee as a credit to one of our other portfolio services.

With that all said, I leave the decision to you.

I just have one final word of warning…

Come midnight tonight, your $200 “Early Bird” charter member discount to Value Hunters will immediately expire.

At that time, the price will immediately shoot up!

So if you’re considering joining, you’ll want to do so before then.

Especially because that automatic VIP upgrade also includes the added safety net from our Ironclad 30-Day Satisfaction Guarantee.

Which allows you to:

  1.  Join Value Hunters as a Charter Member before midnight tonight.
  2.  Immediately lock in that $200 “Early Bird” discount.
  3.  Ensure your VIP upgrade, including our “Executive List” and “3 Dividend Stocks to Combat Inflation” reports.
  4.  Spend an entire month as a full-time member of Value Hunters and if by Day 30 you aren’t 100% thrilled with ALL of that?
  5.  Simply contact our Member Support team and request they transfer your membership credit to any one of our other Motley Fool Canada portfolio services of your choice.

No hassle. No run-around.

You have my personal guarantee as the VP of Membership.

But you lock all that in, you have to join by MIDNIGHT TONIGHT!

Click the button below to get started now.

To capitalizing on the coming “Sea Change,”

jg signature

David Hanson
VP of Membership
The Motley Fool

 


Data as of 1/12/2023 unless otherwise stated. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Fool contributor David Hanson has positions in Amazon.com, Apple, and Berkshire Hathaway. The Motley Fool recommends Amazon.com, Apple, Berkshire Hathaway, Lululemon Athletica, Microsoft, Monster Beverage, and Netflix. The Motley Fool U.S. owns shares of Costco and Chipotle Mexican Grill. The Motley Fool has a disclosure policy.

Value Hunters Canada includes U.S. and Canadian stocks. All billing is in CAD. You will be billed according to your choice below and then $1,199 for each year thereafter.

This product is non-refundable.

Having trouble ordering or have any questions for us? Just send them to [email protected], and we’ll get back to you ASAP!

 

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